Magazine

Good Morning, AOL

June 02, 2002

At 9:30 on a Sunday morning, most of Winnetka, Ill., is still sipping its first cup of coffee. But Jimmy de Castro, outfitted head to toe in black spandex, is peddling furiously on a stationary bike in front of 29 students aping his every move. Father Jim's Bible Thumpin' Sunday spin class is in full swing. To the driving beat of Madonna and Bruce Springsteen, de Castro exhorts his sweaty faithful. "We're going to party!" he shouts. After class, the six-foot-tall Irish-American redhead mixes mimosas and pours cold brewskies. The spinners leave, achy but jazzed, each clutching a CD of exercise music that de Castro mixed himself.

If it were only as easy as spinning, James E. de Castro, 49, the new president of AOL Interactive Services, could have Wall Street eating out of his hand, too. Last the CEO of AMFM Radio Group, the hyperkinetic former radio mogul joined media giant AOL Time Warner Inc. (AOL) on Apr. 15 to turn around the struggling online unit. The company's stock has fallen more than 35% since January, driven largely by slowing ad sales and subscriber signups at the AOL division. A week before de Castro's arrival, AOL CEO Barry M. Schuler stepped aside to head a new unit at the company and AOL Time Warner Chief Operating Officer Robert W. Pittman personally took over the task of whipping AOL back into shape.

A deejay back in his twenties, Pittman brought in the veteran radio man to energize his cleanup crew. Now the pressure is on for New Media neophyte de Castro to restore the division, on whose success the biggest, most closely watched media merger depends. Investors are looking to see whether his over-the-top style will light a spark or flicker out in a corporate bureaucracy grimly focused on the bottom line. In the first quarter, AOL's advertising and commerce revenue declined by 31%, to $501 million, compared with the same period last year, and new subscribers increased by only 1.4 million, vs. more than 2 million in the first quarter of 2001. AOL is hoping it has imported a pit-bull ad salesman to turn that around. "Radio is one of the most cutthroat ad-sales businesses," says Gordon Hodge, media analyst at Thomas Weisel Partners LLC. "A successful [radio] executive will tear up the online space."

If Web savvy were what AOL needed, de Castro would have a lot to prove. But if the care and feeding of disillusioned ad clients and employees is the cure, he appears to have what it takes. A born showman, de Castro believes in spending money to make money, putting on outrageous product promotions, and motivating his employees with psychic and financial rewards. "He understands that when you have a stable full of thoroughbreds, you must make sure their blankets are warm," says Todd W. Musburger, a Chicago agent who has represented a few of de Castro's radio stars. "Many managers walk with a riding crop [to] get their horses to run. But a happy horse runs faster." That philosophy could be a timely tonic to deflated AOL workers facing layoffs and executive departures.

De Castro, who declined to be interviewed, showed early on just how motivated he could be. He was a hockey star at the University of Colorado when he earned the nickname the Deacon, for "deking," or faking out opponents by pretending to go in one direction only to zip in another. In 1974, the penniless graduate landed a sales job at San Francisco's KSFO and traded albums for a refurbished Toyota. Within two years he was driving a red BMW with vanity plates reading "Movin Up."

He made his mark in the early 1980s turning around Chicago's legendary WLUP-FM, "the Loop." In 1988, entrepreneur Scott K. Ginsburg merged his radio company with the Loop's corporate parent to form Evergreen Media Corp. After the feds relaxed radio ownership rules in 1996, the company continued to merge with others, and de Castro eventually retired a multimillionaire in 2000 when Clear Channel Communications Inc. bought his company, AMFM. Along the way, de Castro "helped revolutionize radio's share of the ad pie," says Clear Channel board member Tom Hicks, by giving advertisers a package of stations targeting wide demographics.

All the while, de Castro developed the dramatic flourish as his trademark style. In 1996, Evergreen bought a failing New York station. De Castro momentarily stopped the scheduled demolition of Studio 54 to stage WKTU's remake as a dance station. More than 25,000 people lined up to get into The Last Dance, featuring Gloria Gaynor, Cher, and Ru Paul. "Jimmy thinks life is better played out on the IMAX screen than the small screen," says Garry M. Meier, a former de Castro on-air personality who now is co-host of The Roe & Garry Show on Chicago's WLS-AM.

But the management skill beneath the flash is what may help de Castro most at his new AOL gig. Throughout the radio consolidation binge, he forged a team out of stations more used to competing than cooperating. De Castro would sit warring station managers in merging companies in a room, hand out football jerseys, put black makeup under their eyes, and command them to put their "hands in the middle" to come up with a win-win strategy. Getting AOL and media giant Time Warner to create new services promised by convergence may require similar tactics.

So, will all this fun and flash fly at AOL? After all, former upstart AOL is now part of a big, more buttoned-down corporation. De Castro may have to learn to toe the line on costs when every penny of profit matters. All eyes are on his relationship with his immediate boss, AOL COO J. Michael Kelly, the flinty-eyed accountant who had served as AOL Time Warner's CFO. Could de Castro charm his way around Kelly straight to big boss Pittman? "I wouldn't want to be the one between him and Pittman," says one former associate. "De Castro takes no prisoners."

In the long run, though, AOL will need more than just a boffo ad salesman. It also needs someone who understands the potential of broadband and all the possible new services, such as streaming music and video, that could help the company regain its once-stratospheric subscriber growth rates. For de Castro, navigating online media is a new game. But if he succeeds, de Castro will have performed the ultimate "deke," forging a career path in radio only to swerve at the last minute to the Internet--and maybe even score. By Catherine Yang in Washington, with Ann Therese Palmer in Chicago